During past few years, I’ve come across several network marketing companies. I’ve seen Amway, Modicare and recently QuestNet (GoldQuest) from close angles. I’ve also attended presentations by around 6 other network marketing/MLM companies, names of which I do not remember. I never cared to enroll into any of them, but have been following the developments and their business models out of curiosity.

In this post, I am presenting my general observations about MLM companies. These are not targeted to any specific company (not yet) and there can be some exceptions/ differences/ deviations w.r.t. some companies. Expect some more posts of this kind in near future.

General observations about Multi Level/ network marketing companies

1. No MLM/Network marketing company wishes to identify itself as MLM/NM company
There’s a saying- "if it looks like a duck, swims like a duck and quacks like a duck then it IS a duck". But despite having all characters of a MLM/pyramid scheme/binary compensation/chain membership plans, no network marketing company wishes to call itself as such.

2. Products are for namesake. Main job is to enroll more members
Most of these companies use products as a cover for their chain membership scheme. Products are for namesake. Main objective is to find new prospects and make them enroll under you. They don’t care if you’re a PHD, MBA, MBBS or uneducated or whatever- just hunt for new prospects and sign them up-that is the one and only task for everyone involved…

3. Products are always overpriced.
Networking companies claim to save lot of money because of direct selling, otherwise spent on various distribution levels in conventional marketing (wholesaler, distributor etc). However, in all cases their product is priced several times their market value. (An Amway toothpaste costs 10 times Pepsodent or Colgate, a GoldQuest coin is priced 5 times its market value and so on) if only they can sell a conventional product for few rupees less than their market price, they can make regular shop keepers a run for their money. But MLM companies always need to charge huge premium for their products, because that is one of the ways how members will be forced to pump money into the company. But this huge price difference is often covered up with terms like “High Quality of the product”, “Numismatic value of the coin”, “investment towards Business opportunity” etc.

4. Products are manufactured by some other company
Despite being in business for years, most of MLM companies do not make an attempt to set up their own factories and manufacture something. The product they sell are often manufactured by some other company.

5. Products may not sell on their own in open market
Other than being overpriced, most of the products are unconventional/unique that no one would ever buy them in open market, at least not at the price they are sold in MLM.

6. Network Market Companies never make an attempt to get listed in any stock exchanges.
Getting listed would solicit a thorough examination of company fundamentals and operations by Regulators like SEBI and investor community in general, something any network marketing company may not prefer. Also why would they need to lift money from market as members are continuously pumping their money into the company? (Amway is an exception)

7. Network marketing companies do not make any attempt to build physical assets.
Any company usually tries to build some physical assets over a period of time (such as land, buildings etc) For example, if IT boom crashes (god forbid) companies like Infosys can still survive because the value of land and building they own itself is worth several millions which can be leveraged to move on to some other business or compensate the stakeholders to some extent. But most of the network marketing companies keep their physical presence/assets to minimum. Usually one website and few rented offices in some cities. That’s all. You may call it cost cutting but this given them a unique advantage- One fine day if promoters decide to close the business and vanish, it doesn’t take more than 5 minutes for them to shutdown the website, erase all data and escape to some country from where it will be near impossible for police to trace, extradite and trial them. (Live example: QuestNet was banned in Srilanka recently and they silently have opened a new company called Lotus Marketing and started selling same old QN products.-Details)

8. Network marketing companies never spend a single rupee on its members
If you join a software company as a trainee/fresher, company spends a considerable amount on you before you could be effectively used to generate revenue for the company. (trainings, salary during training and bench period etc). Even in other industries there’s the concept of apprentice period. But network marketing companies never invest a single rupee on its members. Right from Day 1 a new member starts pumping money into the company, only a small fraction of which is re distributed as referral commission to people higher up in the chain.

Training if any, is given by senior members on one sole objective- how to find new new prospects and make them enroll for membership.

Expenditure if any will be on promotional activities like arranging a presentation in a posh hotel and in hiring lawyers who can take care of legal formalities.

9. No territorial protection
Conventionally, when you take a dealership or distributorship (let us say of Bajaj Bikes or Maruti Cars) the parent company agrees with a contractual obligation that they will not appoint any other dealer in your territory. In other words, you’re protected against loss of business that can happen if another dealer opens branch in your territory and takes away your customers. But no such protections (restricting member count etc) in network marketing. No cap, no limitations-there can be two dozen members in your street alone-you may not be able to expand your business under such circumstances as saturation is reached very soon (if there’re already 20 Hero Motocorp (formerly Hero Honda) showrooms in your locality does it make sense to open one more?)

10. You will never get a loan to join MLM company/business.
If you want to buy anything- say a motorbike for 40k, a mobile for 20k or anything- or if you want to start any business (say a factory) you can avail loan from banks (I am referring to Vehicle loans and Consume loans, not personal loans) and finance corporations by giving that product as collateral. In fact many popular industrial houses come up with their own finance arms in long run (Bajaj has Bajaj Auto Finance, Mahindra has Mahindra Finance and so on). But no financier will fund you if you want to join a MLM business (you can of course take a personal loan during which purpose of taking loan is not asked). If MLM companies are so confident about their business model why can’t they launch their own finance arm?Or at least have a tie up with some banks who would loan the prospects keeping their membership as security? Give people loan to join the business, let them repay when they make money from the business, charge high interest if you wish. (If a member doesn’t make enough money to repay the loan confiscate his membership and release him from the chain) Trust me- No MLM company will ever do that, because shelling out money is not their intention.

12. New members are discouraged to speak about company in front of prospects
Anyone who is promoting a MLM (You can randomly call few numbers listed in classified section of a newspaper under work from home/part time job/business opportunity section), will never reveal the name of the company or initial investment needed etc in first discussion. All they’ll say is “come to the presentation”. Topliners instruct new recruits not to do the canvassing themselves and just bring them to presentations. This is because of following reasons-First, If the name is revealed, chances are that prospect will do some googling onlineand find out lots of negative reviews and may never turn up for presentation. Second, a new joinee will never be able to effectively brainwash a prospect over phone. That needs to be done in a closed room, in a systematic way by a trained person. The basis statement “I’ve signed up for this membership by paying 35k, now I need to enroll more and more people under me to get my money back, I am looking for people who can cough 35k and sign up and keep bringing more and more people” is conveyed in a totally different manner so as to give prospect an impression that it is a lifetime opportunity for him to join and make a fortune.

13. The Pepsi example-
Most of them say “See you pay 10 rs for a pepsi whose manufacturing cost is Rs 1”. What’s wrong in our company collecting more money? (i.e. "Pepsi is looting you to the tune of 9 Rs every time you buy a bottle, why don't you give us a chance of looting you to the tune of 25k?") Here’s a major difference- If I drink pepsi or watch a movie that is one time purchase- if I don’t like it without any hesitation I can tell my friends not to go for it, because I have no monetary interest in it. But once you join a MLM you always have to fake things. If you say “I couldn’t enroll a single member in past 2 months and struggling to get my money back” no one will sign up under you. You’ll have to fake it “I am making lot of money in this business, why don’t you also join and get benefited”. Because there’s no exit option, only way you can make money is by bringing in more members, which is not possible to achieve if you’re honest. Deception starts the moment you join. All their training materials are geared up to induce a false confidence in people that they are doing some great service. Those who do not believe in the scheme and refuse to sign up are branded as losers. I’ve seen people claim in public that the potential for this business is unlimited, while in front of their mentor they cry that they are not finding any new prospects. The idea given by the mentor was this- “log in into your company’s employee database, find people sharing your surname or hailing from your state, send some mails to them and make friends with them and then bring them to my presentation” Deception starts with self and spreads to friends and relatives and eventually to society and nation.

People involved in MLM are often encouraged to use the resources (like phone and internet) as well as contacts (colleagues, business contacts etc) available at their work place to grow the MLM chain.

14. No exit option
Few companies give an one time cancellation option (say 30 days from sign up ) After that there’s no exit option. No Plan B what so ever. GoldQuest was banned in Srilanka recently- did the new joinees got any compensation? No. Because of this, the same people who are loosing their money to make the MLM company rich stand up in support of their company. Their only hope of making some money is by bringing in more people who can pour even greater money into the company. naturally they resist any attempt to shut down the company, even if they know what they are earning is a negligible fraction of the amount flowing into company account.

15. The experience doesn’t count
If you work in any other job- as a mechanic, engineer, lawyer, accountant etc, every year you spend working adds to your experience and increases your market value. If you spend couple of years working full time for a network marketing company and then try to join some other company, those few years are not considered as experience by any company.

16. One task- So many names.
The one and only job for you once you join a MLM is to hunt for new prospect and make them enroll as recruits (or business partner or member or distributor or whatever term used in specific to company) Each and every initiative/program/effort is focused on this one task. The term Hard work, be your own boss, part time effort, belief in yourself, helping others, everything boils down to one thing- find a new person and sign him up. Your skills, experience nothing counts. All that count is how good you are in expanding the chain. All training is concentrated in brainwashing you to make you believe that the business is legitimate and you’re actually helping others by enrolling them into the scheme 17. The employer example:
Some give the following example to give an impression that your employer is cheating you by paying you only a fraction of what you earned for him: They say “you work 9 hours for your company wherein you’re paid a small salary but your CEO earns several times that from your effort- Don’t you think our MLM business is better”

But here is the difference in working for an employer for a salary and working under a MLM business:

When a company hires you, you’re hired for a specific skillset (say .Net programming), after thoroughly evaluating you against several other job aspirants with similar skills. You’re not required to pay anything to join and in many cases company spends some money in training you etc. After that, your task is to focus on your work (programming in .Net) and converting that work into real money is your employer’s headache (finding a customer who is willing to buy that code etc). Even when your employer is unable to encash your skills (say you’re on bench) you are paid a salary and several other benefits. Everyday you spend in office adds to your experience, increases your market value and enhances your skillset. You don’t have to hunt for new people and enroll them under you to get your salary. If you have a job, however small or big it is, you get some basic recognition/respect in society.

Now compare that with a MLM Chain membership scheme-Any tom Dick and Harry who can pay the registration fee can join the MLM scheme. No limit on number of sign ups, no selection criteria. Right from Day one, you start pumping money into the company and company doesn’t spend a single rupee on you. If you have to earn you have to pump more money into the system, by signing up more people under you. The MLM company’s only job is this- for every 100 Rupee you give them, they keep 60 Rs and re distribute 40 Rs to you and your upliners. Your work doesn’t command any recognition outside. You earn only when your chain keeps growing and cash inflow is sustained. To sum up, when you work for your employer, you invest you time and effort/skill, which your employer converts into real money and gives you a salary. In MLM, you invest time, effort and money (of yours and your down-liners), MLM company simply collects the cash and gives back a small part of it as commission.

18. Some people do make money
Some people indeed make money through this. Especially who joined the chain early or those who could canvass a huge number of people to enroll under them. It is the success stories of these people that is shown to new comers to motivate them. Those who join late often never manage to recover their money. No cash flows into MLM from outside. Even when you earn money, it is only a small fraction of the amount you and your subordinates pumped into the system. Assume there are 20 people under you- now calculate total money pumped into the company by all of you and net value of goods/commissions received. Since it is your money, no company will have any problem giving back a small fraction of it to you…

19. Poverty should have been eliminated by now
If the earning potential of millions of rupees had been realized we should be seeing hundreds of millionaires around us by now. Still we hardly see people who made it big through MLM.20. MLM Czars never share stage with other achieversMembers of the scheme/MLM companies praise the founder/CEO of the company as God. That person is hailed as a motivational speaker, achiever, successful businessman and so on. However, the reality is that that person is mostly a con and is living a faked success, supported by a bunch of cronies. We never see a founder/CEO/MD of a network marketing company share the stage with other business magnets in any conference/award functions/tv debates etc. They make their appearances only in the events they have control of-the events organized by their own company. Outside of it, their reputation, recognition and involvement will be near zero.

Personal analysis and observations only. Statements are generic to MLM business in general-some companies might take some exception w.r.t. certain observations. Correct me if I am wrong. Feel free to comment and criticize me- but use decent language and support your statement with appropriate reasoning or evidence.

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106 comments:

Good stuff Srinidhi. I really like the way you have analysed all the aspects of mlm/nm business.

It is very true that the so called intelligent people [IT folks] are getting trapped to these kind of schemes. Even I have spoken to a number of members so far and planning to write about it soon on my blog. one thing for sure, your points will give a new direction and thought for people before enrolling to such unethical business practices.

I do not see any major problem with insurance industry making profit-They take a calculated risk (one can afford to pay a small premium in exchange of an assurance that if something goes wrong his loses are taken care of.)

If you are sure your family can manage without any financial aid after your death you dont have to take insurance..

Explain what do you find wrong in insurance business...

Nitin: Regrets that you lost money. Give me some more details of the personality development things u are referring to...let me see what I can do

i lost 3 friends to Amway. they were nice friends.... one day they pitched Amway to me, i tried to show that the odds of my making money is low, so i want to stay out. they pestered me to attend "presentations" and see for myself how successful Amway people are. i finally stopped talking to them because amway is all they talked about.

Brilliant post. Found it via Desipundit. Your analysis hits the nail on the head. I've been to a couple of MLM—or whatever they may choose to call themselves—presentations, and the outright hypocrisy and plain cheating just surprised me.The mainstream media is usually blissfully unaware of this malaise and it's good that you brought this topic under the scanner.

This is a really good article. I'm in America and it's pretty prevalent here too, but what's surprising is that most of the speakers or the ones at the top of the chain are Americans while a lot of the people at the bottom of the chain are Indians. I have never seen a demographic more attracted to this phenomenon, than us. One of our good friends is into quixtar big time and we use similar reasoning to convince him why he cannot become rich and retire with this strategy in the next few years. Even though it's been a few years, he still isn't anywhere close to becoming millionaire. Besides he spent hours and hours on a daily basis with their meetings, listening to their motivational tapes, and reading their books. That's another revenue stream of the company...the motivational books and tapes that they sell.

Have you seen the dateline show on this whole MLM companies they aired a couple of years back?

I have no indepth knowledge of network companies as such though knowledge imparted by you is quite sufficient.. But have a real indepth knowledge of Amway agents sorry if there is anybody around but shudders,I came across at least 10 of them first two times I was listening other 8 times I was looking for the nearest escape :D I find these agents are more intrested in getting a new agency rather than selling the products

gr8 revu Swati

enidhi said:Mar 13, 2008 06:56 PM

Yes Swati, as I said, enrolling new members is their primary objective...

MLM schemes reach saturation very fast and after a point is becomes really frustrating for everyone involved... shriramsrinivasa said:Mar 13, 2008 07:11 PM

Hi Srinidhi,

Its a beautiful write up. It sure would create awarness to many about the way the MLMs function. Anybody wants to escape the tortures of the MLM people can use this review to cross question them...Sure they wont have answers to many of them....

Regards Shriram Editenidhi said:Mar 13, 2008 07:16 PM

Thanks Sriram

sandy06 said:Mar 13, 2008 07:32 PM

good review, got to learn something, many people get carried away without getting into details angel25 said:Mar 13, 2008 07:59 PM

Nidhi,

Always beware, there are no ’get rich quick’ schemes anyway that are worth it!

Cheers Veekey said:Mar 13, 2008 08:07 PM

Hi Shri,

Zero knowledge and nil interest but useful for few I know...Link already sent. :)

Vee Kweldebs said:Mar 13, 2008 08:15 PM

I had an opprtunity to know one of the MLMs closely. What I found, one can earn money if they plan their chain properly & can earn quick buck. Not all products are useless, there are couple of good household items available through such concept. Little costly though!! Editenidhi said:Mar 13, 2008 09:19 PM

@Sandy...

Thanks.

enidhi said:Mar 13, 2008 09:20 PM

@ Angel25

Yes I understand...

There’s no shortcut to success...

Nidhi

Editenidhi said:Mar 13, 2008 09:21 PM

@ Vee

Thanks.

enidhi said:Mar 13, 2008 09:23 PM

@ Debs

Well, you’ll earn properly only if you can find hundreds of people to join under you... and what you earn is from the pockets of those people joining under you...

HI,excellent post on MLM & 'Scamway' oops i meant amway.I had wasted 3 weeks of my life on this opportunity, but better late than sorry

few tips on this particular mlm

i. they r tanked in the USii. thei r main market is asia( india & china in particular) whereina large middle class existsiii. they were banned in china when the chairaman of amway meet with chinese govt & 'smoothened things out'iv. worst of all they train to the fact that those who dont join u r against ur success and couvertly suggest to 'break free' from friends/relatives even spouses that 'dont see the opportunity', eventually members will not have any connection(read social life) with those that are 'not in the circuit' v. the upline has to be treated on par with god. no questions to be asked ever

for more info chk outhttp://www.rickross.com/groups/amway.htmlhttp://www.rickross.com/reference/amway/amway23.htmlmlmsurvivor.com

Most of your "analysis" of Network Marketing comes off as VERY ignorant to what MLM is.

First of all, your trying to compare a home based network marketing business to a traditional business model. What sense does that make? ITS CALLED A HOME BASED BUSINESS! Why would a MLM company need more than a manufacturing facility and a office for the owners of the company if all of its distributors are WORKING OUT OF THEIR HOMES? are you kidding me? Then you ask why people can't get loans to join a MLM company... wow.... it may be because its illegal... or MAYBE BECAUSE IN MOST CASES COSTS LESS THAN $200 DOLLARS TO GET STARTED. And most times it costs about $35 dollars to become a member, then you are obviously advised to purchase product. So my question is: Why would you need a loan to purchase something that costs less than $200? If you cant afford $200 to purchase something that could change your life, then whatever "program" your on obviously isnt working out for you.

35k to get involved? what company are you looking at?

Then you say new members are discouraged to talk about the company in front of prospects... lol. who are you? Do you seriously expect new members of a MLM company to realistically be able to tell one of their friends or family members what they are involved in without a.) making alot of mistakes and b.)telling what the company is about in a way that makes sense? Thats why there are CD's and presentations. In order to remove yourself from the spotlight and let someone more EDUCATED ON THE BUSINESS DO THE TALKING...wow..

Your "pepsi" example is mind blowing to me. No respectable MLM company would ever tell its distributors to "fake" making money in their first 2 months. First of all, since your comparing a MLM to a traditional business now, how long does it take a start up company to start seeing a profit from their business? Most companies dont start seeing any type of profit in their business until after a year, IF they arent already out of business by then. 95% of traditional businesses go out of business within the first 5 years of starting, and yet when people get involved in MLM they expect to make $10,000 in their first 2 months... what sense does that make?

A scheme? brainwashed? No, the scheme was when I went to school for 22 years and got "brainwashed" to learn how to work for someone else for the next 40 years, then when i retire, live off of a fraction of what I was making at my job, which in most people's cases wasn't enough in the first place.

THE PURPOSE OF A LEGITIMATE MLM COMPANY IS TO MOVE PRODUCTS. OF COURSE we're always looking for prospects. If you have a company with products people like, I.E MaryKay, Avon ect. , then there isn't a problem. Now, of course there are companies that have bad, over priced products. its YOUR job to do the research on your company and separate the good from the bad.

and finally, so many people get involved with MLM and after about a week, after the people they thought would see the oppurtunity didnt, get discouraged. They don't do what it takes to become sucessful,so they say "THIS IS A SCAM! IM OUTRAGED!" No, it didnt work because you talked to 5 people and when it got hard, when they didnt see what you saw, you quit, just like anyone else in any other kind of profession would. The purpose of taking prereq classes at a business school is to "weed out" the non serious students so they can work with the serious students. They dont just let "average joes" become doctors. They have to study for years before they become one. so of COURSE you have to work on your skills. OF COURSE you have to have some thick skin, because there's always going to be people like you who just dont get it.

I could go on, but those were the main things that popped out to me as particularly ignorant. Take it easy.

It may take just 35$ to get started, but how much one would end up pumping into the system before he starts earning a profit (above his expenses)?About the loan- it is not being able to afford or not afford. MLM survives on idea that new members keep joining, continously pumping in money. Even if a part of this money was to be funded by the organization, the entire system will collapse

35K I was referring to QuestNet.

Explain me this-Why members hide the real name of the business (Amway, QN etc) and try to lure people into presentation under false pretexts? Even the educational CDs state the same- avoid revealing the name of the company.

Unlike other start ups, MLM thrive on the idea that new recruits continue to join and money keeps flowing in, a part of which is redistributed among upliners. One fineday if the chain stops,(may be company is banned, may be saturation is reached etc) more than 50% people, bottommost in the chain will be losing their money- explain how will the MLM company compensate them?

Well, in that case, the MLM/Nm should have produced hundreds of millionairs in our society by now...Why is that we hardly see any?

OK.

Basically, unless you can fool few hundred people to join, you cant make any money

Dude, i usually dont respond to blogs or posts like this but in this case your opinions and your "analysis" is so far off that its crazy. I think its irresponsible of you to even write something like this without doing any real research.

First of all you could simply type in "Network Marketing" on google and find many articles that SUPPORT network marketing. People like Donald Trump (I've read that he is ctually on the board of a MLM company), Warren Buffet (he OWNS 3 MLM companies...why would one of the richest men on the planet OWN 3 MLM companies if they were a "scam"?, Robert Kiyosaki,Robert Allen, andMark Victor Hansen have ALL talked about how Network Marketing is a GREAT way for the average person to become a millionaire. I supposed they are all scam artists, as well? Maybe they are all "brainwashed" and in one of the MLM cults you were talking about (if they are... i need to get in that cult ASAP)

As for your claim that "unless you can fol a few hundred people to join, you cant make any money"... that couldny be further from the truth. I've met literally DOZENS of people in MLM that havent signed up any more than about 30 people and are making more money than most people make in a year. As a matter of fact, Dexter Yager, a distributor in Amway (the company you did your "research" on) has said publicly that he has only signed up 44-45 people in 22 years of being involved with MLM. Last I checked over 2/3rds of Amways revenue comes directly from his organization.

While im not a Millionaire in MLM (i havent been involved that long, but i've done alot of research) im stil making good money, especially for it not even being my first year active in MLM. People in my company that i've personally met and know pretty well are making substantial incomes, including my direct sponsor who is making a crazy amount of income. It depends on HOW SKILLED YOU ARE AND HOW HARD YOU WANT TO WORK IN ORDER TO GET THE INCOME YOU WANT. Most people who get involved with MLM expect to put in alittle amount of effort to get a big reward, and thats not the way it works.

Over the past 5 years 32% of the worlds millionaires have been created by homebased businesses. That's an actual statistic. look that up the next time you do some more research.

I dont even understand what you were saying when you talk about "what happens if the company gets 'banned' or the market saturates, then how do the distributors get compensated?... Really? What happens when "Joe" from michigan starts up a coffee shop in Detroit and a year from then he has to shut down his shop because he wasnt getting any business? Does he get compensated for all the money he puts into it, or does he lose money?

I have been looking at different MLM companies for a long time deciding which one would be the best for me and not ONCE have i came across a company who hides its name on the CD, I know my company doesnt do that. As a matter of fact it says the words "Network Marketing" right on the CD. The only sense what you just said would make is if you were looking at a company like Amway(which is exactly what you did), thats been in business for a long time. I wouldn't want my company name right on the front either. Who DOESNT know about Amway? they probably dont want people to prejudge the oppurtunity before they see how it works and say no it. That wouldnt make great business sense, in my opinion.

I dont know much about the other companies you mentioned, but if they are anything like Amway then thats a big problem. First of all, Amway was one of the first Network Marketing companies. As a result, its EXTREMELY difficult to make any money in Amway, especially since its such an old company. Amway isn't even a true "Multi Level" because you dont really get paid Multiple levels. Amway has a break away system. over 70% of MLM companies today have a UNILEVEL compensation plan, which pays MUCH better than a break away would.

Again, its the PERSONS decision on which company to join. YOU have to make that move. Its your responsibility to pick the company that offers you a good product, has a strong management team, and HAS A GOOD COMPENSATION PLAN before you decide to go into business for yourself. OF COURSE there are bad MLM companies out there, just like there are bad TRADITIONAL businesses out there.

Finally... your loan comment is still completely irrelevent to me. The overhead of a MLM company is $200 a month max, maybe alittle more if you choose to purchase CDs or Brocheres or whatever. I want you to TRY to find a traditional business that only has an overhead of $200. You would get laughed at.

Gentleman,While you’re free to air your opinion and chose not to respond to my posts, I am sure what I wrote made sense to many.

It is very much true that those who started a MLM company made huge amount of money. Because they are not declared illegal in most countries people are convinced that they are legal. Founders and early members do make a fortune of it, only from the money sucked from the downliners, who keep pumping in money chasing a nonexistent financial freedom. My concern is about those at near bottom of the chain, who entered recently when membership is near saturation and struggling to recover money. Your words- “how skilled you” and “how hard you work”- both translate into one simple thing-how good you are in hunting for new prospects, sell them dreams and signing them up.

Dexter Yager minted money by selling motivational stuff (the tool-CDs, books, tapes etc full of training material) to the new distributors and not by using Amway products. Not everyone can sell tools and make money. Read Merchants of deception for details.

Well, there’re many which qualify as home based business but need not be MLM/NM. For example, Michal Dell’s initial days- assembling PC in his dorm can be called a home based business but that is not MLM. So don’t mix both. Check a simple stat- how many million Amway members are there in India and what percentage of them are diamonds.

Traditional business can be covered under insurance which can compensate certain losses. Let me know if any insurance company is willing to cover MLM business.

A tele-caller trying to sell credit card won’t have problem revealing name of credit card issuing Bank, however prejudiced people are against the unsolicited credit card calls. Why a MLM/NM company should hesitate to be proud of its identity and try to push products and membership under cover? If their product/service is good and price is economical they should be able to come out clean, more so since they are in business for decades. Let me know which company you’ve become a member of.

Ok, but you have to admit-at any point, in any NM/MLM company there’ll be more than 50% members, at the bottom, who wouldn’t have made a penny out of their investment. In order to get money out of their investment they need to bring some more people and ensure that a significant amount of money is pumped into the system. No traditional business is this demanding.

IT may sound irrelevant to you, I can’t help it. The truth is, a MLM/NM company would collapse, if it has to spend some money on its members.

I don’t expect you to get convinced by these, as you don’t seem to be willing to consider the darker side of it. Can’t help much. All the best.

Well, its pretty obvious that it doesnt really matter what we say, both of us are going to keep our opinions, which is fine.

Actually i responded to each and every thing that you said in all of your posts, I think you just pick and choose what to read based on what you feel you can actually have some kind of response on.

Both of my IMMEDIATE upline business partners were six figure earners in companies that were very old. One came from a company that was 10 years old, the other company was 25 years old, so that statement that only people who get in early can make money doesnt make any sense to me.

Network Marketing has been around for 60 years. It is a 130 billion dollar industry worldwide. It has created more millionaires than any other industry on the planet other than real estate. 32% of the worlds millionaires over the last 5years were created from homebased businesses. Those are just the facts.

Like i said in the last post, there 2 BILLIONAIRES and many MULTI MILLIONAIRES that have a lifetime of business experience and intelligence who say Network Marketing is the best way for the average person to create wealth. Some of which are, or have been, involved with a MLM company. How you can look over that is mind blowing to me, but to each his own.

Dexter Yager makes most of his money from CDs NOW, but he still makes BANK from being a distributor. Like i said: 2/3rds of the company is in his downline. Second, i highly doubt he's still an active distributor who sponsors people and helps other people sponsor directly, so it would only make sense that he gets most of his money from CDs now. Thats his main focus.

Check the stats on how many people are diamonds in Amway? I just got done telling you that its extremely hard to make money in Amway. i'm not going to repeat why in this post, but i already stated that. I dont need to check stats to know that you cant make much money in Amway. the odds of getting to the top of the comp plan in that company are extremely low.

Ya, insurance companies can compensate CERTAIN losses. not all. The money you lose from a MLM company if you fail and the money you lose from a traditional business if you fail can't even compare. I know people who buy a pair of jeans every month that cost the exact same as the overhead of most MLM companies. You probably couldn't even pay your light bill for what it costs to operate a MLM company in a traditional business. I'm just failing to understand why you would think an insurance company would need to cover a cost like that, ESPECIALLY since at anytime a person can easily get out of a MLM company. Its not like they are FORCED to continue to buy product or buy CDs. In a traditional business you are prety much FORCED to stick it out with your business until you know for a fact that you cant make money. Someone could join a MLM company today, quit tomorrow and not think twice about it. Explain to me why an insurance company would want to cover that?

Your absolutley right about how MLM companies should be proud of the product they sell and should tell people straight up that they are, infact, a MLM company.And thats exactly why they do, atleast the one's that I'm aware of. Like i said, my company has "NETWORK MARKETING" right on the CD's and magazines that we sell. I have no problem at all telling someone i'm with a Network Marketing company.

Of course there will be 50% of people at the bottom who don't make money. Actually the figure is 70% (atleast in the wellness sector that I'm more familar with). 70% of people who get involved with a MLM company dont join to work a business. They join to strictly use the product they sell. Out of the other 30%, 17% actually get serious about building the business. out of that, about 3-5% percent of those people earn the BIG six-seven figure incomes. That 3-5% success rate is actually constant with the percentage of Traditional businesses that make it past the 5 year mark, which, coincidentally is exactly how long it would take a person who consistantly builds a MLM business to earn that BIG income.

AND YES, THE POINT OF A NETWORK MARKETING COMPANY IS TO BRING MORE PEOPLE INTO THE BUSINESS. THATS HOW YOU CREATE VOLUME IN YOUR ORGANIZATION. THE ONLY WAY ANY KIND OF BUSINESS CAN FUNCTION IS IF PEOPLE ARE BUYING THE PRODUCT THE BUSINESS IS SELLING.... wow... i want you to name me one legitimate business that has succeeded without people purchasing the product it was selling. The WHOLE POINT is to get people to purchase your product. The difference in a MLM company is the distributors who do the best at FINDING those people and HELPING them build their business get the most money.

And no, in a MLM business its not about finding all of those people by yourself. I would rather sponsor about 10 people and teach them how to sponsor 10 people and so on and so on than to sponsor 150 people and try to do the same. First of all there would be no way possible to work with all of those people effectively. Most of those people would drop out just as fast as i got them in to the business. Second of all it wouldnt even make sense to sponsor all of those people because (and i think this is what most people dont seem to understand about how most comp plans are designed) YOU DONT GET PAID BIG MONEY FOR HOW MANY PEOPLE YOU PERSONALLY SPONSOR. you get paid the long term residul income by helping the people you bring in sponsor people, and so on and so on. Thats why in ALL of the comp plans i've seen, it says find 3-5 people would will build the business to get to the top of the pay plan. It doesnt say anything about sponsoring 100+.

I have no idea what your talking about in your last sentence, so...

A darkside of the business? No i dont see that. The business model is actually very simple. The fact of the matter is most people are just too lazy, scared, or conformed to work a MLM effectively. As i said before, there are some bad MLM companies out there, just as there are bad traditional businesses. Your job as a business owner is to do your research and find a company that is good for you and has a good product, good leadership, and has a fair compensation plan.

And no, I'm not really writing this for you. I already know there is no way you would look at what i just wrote without any bias. I'm writing it for anyone else who may be reading this blog and looking at the comments so they can understand that MLM is a legitimate business. But understand that if you get involved with a MLM company and you want to make some serious money, do your reserach and find the company thats right for you first. Don't just jump into a company without knowing too much about it. And remember that it isnt going to be easy, ESPECIALLY not in the first year. But if you have good upline support, you stay CONSISTANT and you continue to grow as a person, then your success in the company is gaurenteed.

You’ve not yet disclosed the name of the network marketing company you are associated with. Please share with us name of this great company...

You yourself have admitted that Amway has reached saturation and it is extremely hard to make money in Amway… What makes you think your company will go on sine die? Any NM company will reach a kind of Saturation over a period of time. It can’t go on infinitely… Get hold of an Amway person-he would argue why Amway is the best and other NM/MLM companies are useless… We can go on arguing forever, I don’t feel a need for that.

Rest of your comments boil down to one point- If you need to earn Rs 5 you need to ensure that Rs 100 is pumped into the company by yourself and your down liners…If you can’t get them Rs 100, you won’t get Rs 5…Working hard, working consistently everything means the same-ensure that a huge amount is pumped into the system, you’ll get a small fraction of it. No other skills, expertise matter-just bring hard cash. Simple enough- but think of the total money you extracted from your friends and relatives and gave to company before dreaming of the small fraction you would get in return.

i've read all that you wrote, no doubt that the points enlighted by you are real and true to some extent ...i say this because all the companies are not going the same..but what i need to ask is that is starting mlm company totaly a negative and ilegal thing?if its than why is the european goverment which is 100 times advanced than india goverment in everysense has allowed such companies to run and promote business in every possible field?

I didn't say anything about Amway reaching saturation being the reason people can't make money. I said people dont make money in Amway because the compensation plan is garbage. I said that Amway was one of the first network marketing companies, so obviously they are going to make mistakes on the compensation plan. I also said that 70% of MLM companies now use a unilevel compensation plan, which pays out MUCH better than a breakaway comp plan like Amways.

And the idea of market saturation is overrated, too. the legal age of when you can join a MLM company is 18, so that means every year there is a whole new group of people who can join a MLM company that couldnt last year. Paint a mental picture: I'm sure you have a cell phone right now,and i'm sure you have a TV. In that same respect, you can be sure that most Americans can say the same thing. If market saturation really existed then why do both of these markets continue to thrive? Its because A.) There are new people every year buying new phones and TVs, and B.) The companys come out with newer and better products, which just the same for a MLM company thats been around for a while.

As for your final paragraph....I dont really see where you were going with that, but as far as the only thing that matters is "bringing in hard cash".... at the end of the day isnt that what any business is about? If your a car salesmen the only that that really matters at the end of the day is how many cars you sell. If your not selling cars, not only do you not get your commision (**which would only be a fraction of the actual cost of the car**), but you'll most likely end up getting fired from your job (which is the same for any sales company). The people who have the best communication and people skills at the end of the day make the money. So my question is: Why are you expecting MLM to be any different? is it because you dont have to go to school to become a network marketer? What is it?

This "dragging your friends and relatives" business is complete garbage to me. First of all if your friends and relatives dont want to get involved, they dont have to. Its the network marketers who nag, beg, and bug their friends and relatives to get into the business that give MLM a bad name as it is. Of course your going to ask those people at first, it's the first logcial step to ask people you are close with first. But, unless you have some really sharp friends, thats only going to get you so far. Skill and strategy are going to have to kick in when your done talking to your friends and relatives. Your going to have to go outside of your comfort zone and talk to QUALIFIED PEOPLE in order to be successful.

If someone doesn't want to talk to people they dont know, then quit. Its not the right oppurtunity for you, which is fine. But don't say that MLM is a "scam", "cult", or "doesn't work", when you know damn well it was YOU who didnt WORK THE BUSINESS. the system works. If "the people at the top" are the only ones making money, then obviously its possible to get to their position if you really take the time to think about it. At some point the people at the top were exactly like you. They just worked hard, found the right people and stayed consistent.

This debate could go on forever, but I've said everything I needed to say on the subject. There's always going to be ignorant people who are going to tell you something can't be done. That's just the way the world is. I understand that no matter what I say your most likely not going to get passed your own bias and see the truth, which is fine. Like i said in my last post: I just wanted to let people out there know that MLM is real and it's here to stay. So dont listen to the doubters out there. Anytime someone says something bad about Network Marketing is just tells you how little information they actually have.

You haven't given any references from where one can verify the so called facts...One can find equally strong number of facts-millions of people going bankrupt chasing a financial dream in MLM...

For every person who makes fortune there'll be over 100s of people losing their money, because no money comes from outside the system, but from downlines. If you dont believe, just explain us how you and your downline can earn more money than what you people paid to the system as a team.

When it comes to a job, your employer pays for your skills, not for the money you bring in.

New people joining every year-with all popular MLM companies losing popularity and gaining criticism, people who join will be more cautious and hestitant than ever. When it comes to TV or other products, people buy voluntarily, as they feel like buying it...in MLM you need to struggle a lot to convince someone to join-the overpriced and often useless products sold in mlm-would have no takers if left for sale on its own...

If I am a car sales man, I would try to sell the car by highlighting the features of the car and not by selling a dream that buyers can become millionaire by buying this car and make 2 more people buy it...That's the difference.

@ Jamor: You say Amway doesn't pay well, but your company-whatever it is, name you are not willing to reveal-pays excellently...How a common man is supposed to distinguish which is bad and which is good? Many of them sign up because of their faith in their friend/relative who introduces them to the plan... When they realize that something is wrong, it will be too late...

@Anon:Many companies keep some products to cover their pyramid schemes and pose as if they are into pure marketing... With several politicians in their pocket they often manage to get necessary govt approvals...

Many people do not realize the potential damage in initial days, because everything looks good... Only when situation goes out of control they wake up...When Chennai police cracked whip on Questnet, several national level politicians and beaurocrats tried to influence and halt the investigation (TOI, 5th May, Chennai edition, page 2)...

btb you have quoated Europe...What about US where these schemes are banned?

After investing in QN, i have been following almost every blogs on Net.. Just to try and stop people from not fall for such stuffs. Thats really a nice analysis.. Great work ... i hope maximum people get the awareness and can be saved from the MLM / NM traps ...

Well, sure... All you have to do is type in "Network Marketing/Homebased business + Tax Advantages" in google and you could come up with hundreds of pages that talk about all the tax benefits you recieve from properly operating a MLM business. You can also contact any accountant that knows what they are talking about and ask about the benefits of owning a MLM business. You could also go straight to the IRS website itself (http://www.irs.gov/businesses/small/article/0,,id=98846,00.html) and learn how you can earn these tax benefits.

If your still not sure I would suggest contacting the IRS over the phone and directly asking one of the agents "Can you recieve tax benefits from operating a Network Marketing business?" I'm sure you'll get the answers your looking for. 1-800-829-1040

I know i personally got about $3000 back on my taxes because of my network marketing business. I was able to ride off my gas, offices expenses, and many restaurant dinner expenses ( the ones where I was conducting business) and I've been doing so for the last 4 years.

So, in essence, what im trying to say is I find it very odd that the government would allow me and dozens of other people that I personally know to continue to get these tax benefits every year if what we are doing is illegal.

I dont think that you did a good enough job "analyzing" the Network Marketing industry. While you yourself may not like what people do in MLM (I dont agree with ALOT of what you said, but if thats how you feel thats fine), the fact still remains that Network Marketing IS a legitimate business.

I am not a US citizen so not much familiar with local laws. But then, yes, people doing independent business do get tax exceptions on their expenses (Consultants, authors, bloggers who work from home and many more professions are eligible this way-I believe same must have been extended to those associated with network marketing.

Congrats to you for saving $3000 that way.

I never said the network marketing as a whole is illegal. But for sure specific companies are banned in certain countries and in other countries they might be legal, the way it is promoted needs to be checked. If members resort to unethical practice in promoting the business then it is certainly something to worry upon.

In my opinion you, infact, DID call every network marketing company illegal and unethical, hence your title "An Analysis of Network Marketing/MLM Companies". In your analysis of the whole industry you isolated a couple companies and based all of your information on those companies. Thats just like if I were to title an essay "An Analysis of Traditional Businesses" and have Enron as the company i was basing my opinion on.

Network Marketing operates in over 80+ countries around the world, including your own country of India.

And yes, you hit the nail right on the head. Its not the INDUSTRY that is unethical, its the PEOPLE who get involved in the industry that do some of those bad things that cause the problems with people. The Industry itself its excellent, in my opinion. I love the products.

I think most of what Jamar Pryor wrote on your blog is right on the head. You can't really look past what he wrote, my friend.

I HIGHLY encourage you to do a REAL analysis of network marketing instead of speaking on your own opinion. I think that you'll find that there are EXCELLENT network marketing companies out there.

I wish you the best. I'm sure your a really good guy, but i just dont agree with your opinion on MLM.

I have stated "In this post, I am presenting my general observations about MLM companies. These are not targeted to any specific company (not yet) and there can be some exceptions/ differences/ deviations w.r.t. some companies."

As long as the network marketing companies do not develop the disturbing characteristics I have listed, do their business without having a pyramid like schemes undercover, survive on the strength of their products and not with a promise of wealth creation to whoever buys them, I have no concerns as such. But most companies develop one or more of the symptoms listed in this post http://www.enidhi.net/2008/05/11-reasons-mlm-companies-go-bad.html and start losing credibility after few years.

Ensuring that people involved never resort to unethical problem is a major problem for these companies and unfortunately many of them are totally ignorant of this. Only when things go out of control they hunt for some scapegoat...

Why don't YOU provide me with a real analysis of network marketing business?

Thanks.

@ Anonymous:Anonymous comments making personal attacks/abuse will be deleted. Disclose your identity and use a decent language.

fentastic stuff man....very very good. I joined in quest net for qvi club, when i tried to used the membership, I called a resort to book for the vacation which name was mentioned in the qvi club booklet give to me when i purchased it. The resort receptionist said me that they are not part of any qvi club nor www.xchangeworld.com. Then it was confirmed they are FRAUD. QUEST NET is FRAUD as a memeber i say its basically all the networking companies do the same.One more thing is that i asked the same with quest support team they said I need to pay $150 to book the resort. It was not told when i took the package.....because if it was said then i will thin twice before doing that, and as you said after the presentation that person said the company name, he was hiding the name and told me to do the same.(They call it as good prospecting.)

@Jamar:Like i said in the last post, there 2 BILLIONAIRES and many MULTI MILLIONAIRES that have a lifetime of business experience and intelligence who say Network Marketing is the best way for the average person to create wealth.

For this statement i would like to ask you sir you are saying there are 2 billionaires that fine and good but tell me how many people they might have cheated to become a billionaires..you haven't told me that....how ignorant your reply was. One more ignorant answer from my side is all the networking marketing companies will not ask you to be a millionaire they start the company to fool the people and become rich in over night, in their path some customers may become rich. what percentage please you tell me i am weak in maths.

@SrinidhiThanks Chintan and Pushki for agreeing...

This is not a point of agree or dis-agree, these are the facts, fact is you are right. Next time tell thank you for supporting me and truth.

Great analysis. I lost a few friends to Amway whom i couldnt stand any longer.I attended meetings because of these friends and found them to try and whip up hysteria about success stories.I however do like some of the products they (Amway)sell - they may be expensive but some are real goodBut its true - most of them are Ponzi schemes and if you are sucked in late, you need to quit early to minimise losses

Yes, quit as early as possible. But unfortunately many wont do that. They run in loss (keep spending money buying products and tools) for years without any returns. They believe once they start getting returns it will be exponential...

Dear eNidhi,I found your analysis very effective, Also I would like to comment upon my experience with GoldQuest or Questnet.After numerous attempts of my friend and office mate, I attended the presentation (which I would call it as a brainwashing session). They are very good at convincing people that its a legitimate(Halal) income. And even I have seen people distributing pamphlets on the road during my morning jog near tidel park, stating "Earn 11,500 rs everyday". sounds ridiculous isn't?

One upline swiped his credit card for me ( Rs.29000). He asked me to pay back in a month, saying that the business has the potential to give back that amount in a month. During that month I tried many of my friends, friends' friends, office mates etc to attend the session. But no one was interested to join,. My upline were very motivating then..

Once I paid back the amount in a month's time, my upline wasnt so interested in me as he was in the month preceding it. He has got my money, thats it..

I tried to rope in my friend in Delhi, he attended the session after travelling for 2 hrs from gurgaon. He joined because of his friendship with me. The upline who promised me that he would be conducting the sessions every week at Delhi so as to help downlines get prospects, didnt go after that even once.My friend got frustrated and was not on talking terms with me. Thus I lost one friend.

I WOULD LIKE TO TELL EVERYONE THAT ACCORDING TO ME, GOLDQUEST IS A FRAUD COMPANY AND IT IS UNDERINVESTIGATION BY CRIME BRANCH, CHENNAI.

@JAMAR PRYOR,Also, I would like to ask something, u mentioned on April 30th 2008: -----------------------"Of course there will be 50% of people at the bottom who don't make money. Actually the figure is 70% (atleast in the wellness sector that I'm more familar with). 70% of people who get involved with a MLM company dont join to work a business. They join to strictly use the product they sell. Out of the other 30%, 17% actually get serious about building the business. out of that, about 3-5% percent of those people earn the BIG six-seven figure incomes. That 3-5% success rate is actually constant with the percentage of Traditional businesses that make it past the 5 year mark, which, coincidentally is exactly how long it would take a person who consistantly builds a MLM business to earn that BIG income.

AND YES, THE POINT OF A NETWORK MARKETING COMPANY IS TO BRING MORE PEOPLE INTO THE BUSINESS. THATS HOW YOU CREATE VOLUME IN YOUR ORGANIZATION. THE ONLY WAY ANY KIND OF BUSINESS CAN FUNCTION IS IF PEOPLE ARE BUYING THE PRODUCT THE BUSINESS IS SELLING"----------------------

1. When you accept that the failure rate is so high, inspite of all motivations and help from the uplines, Then, CAN U GIVE ME ATLEAST ONE INSTANCE OF THIS RISK (OF LOSING MONEY, IF NOT UPTO THE "MLM" STANDARDS OF LIVING, "NOT-SERIOUS" , "INCONSISTENT" etc., ) BEING EXPLAINED IN ANY OF THE PRESENTATIONS OR MEETINGS IN WHICH THE PROSPECTS ARE BRIEFED ABOUT THE BUSINESS??2. ALSO THE NEGATIVES OF THE BUSINESS, LIKE COULD BE CAUSES OF FAILURE etc ARE TOLD TO THE PERSONS ONLY AFTER ENTERING THE BUSINESS (read : after paying our hard earned money) .

IMAGINE IF A PERSON IS NOT IN THE MOULD OF A PERSONALITY REQD FOR THIS PEOPLE-GATHERING SCHEMES, HOW WOULD HE SURVIVE THE BUSINESS NORGET BACK THE MONEY.. But he will be taken by surprise that the same leader who spoke of prospering in the business, would be speaking of all unethical practices in order to lure other people into the business,

ONCE U FALL INTO A PIT AND IF U CANT COME OUT, U WILL ALWAYS TRY TO PULL OTHERS INTO IT, SO THAT U CAN STEP ON THEIR BACK TO COME OUT OF IT (read: Earn money)

Every other traditional businesses, while selling the products or things, has warranty, always has a channel for reaching the manufacturer and remedial measures in place. Also the consumer has the choice to choose the product or not, because he knows the drawbacks in those items (broad awareness about those products)

-- Please give me one MLM/NM which gives a presentation that focusses both on positives and negatives?

-- Also why are those presentation managers and uplines always so insistent on signing up the business so quickly without giving breathing space? (the convenient reason they specify to urge u is that if u take time, then some one else would join above u and they would earn double than that of what u earn) PLAYING TRICKS..-----------eNidhi, Can u please let me know the details of the progress of questnet investigation in chennai?

I don't have any updates on Questnet investigations. Local Media has been silent on this. However I am sure the IRs won't be able to enroll anyone now given all the negative publicity so far. May be they will go for a name change again and take a new avatar before resuming their hunt.

I was going through your posting and enjoyed the points highled there. Personelly I think you are looking at MLM from the outer enviroment, if only you had involved in it then you would have understand it better. I do agree that there are a lot of scam related MLM operators who are abusing the original concept and theme of MLM, but that cannot be used as a base to critize the entire MLM industries.MLM is a legitimate business and honest business . It merely gives an oppurtunity and anyone regardless of his education level to earn a decent income or even better to become a Rich Businessman. Is it a SIN for a non educated person to beome Rich?If you have time kindly take a look at my companny website at www.k-link.com, here you will understand why this company has grown and expanded the business in more then 50 over countries and even bought their own premises in some of the countries. The company is progressing first because of it's product and then onlt the marketing plan. I am coming to chennai on next week, hope we can catch up for a cup of tea.Thanks

hi,my friend is working for SkyQuestcom and is very eager for me to join. I am a bit sceptical about the whole issue of network marketing. If i use my n/w, i might lose my friends, i fear it. so wat do u all suggest.

@ Anonymous - May it be skyquestcom or any other mlm/nwm... they are all the different flavors of the age old money distribution(or circulation) schemes. Know in and out of the system regarding all aspects making up your mind.

okie well done srii,But all your concepts are taken away in air with the launch of SkyQuestCom ,a new networkmarketing company giving Value added education which will help one to be successful in life as well as to create entrepreneurs & financially independent People.Each and every one need to have this knowledge & you can avail this only through www.skyquestcom.com.regardsjijusqc@yahoo.com

well I have read all comments on network marketing. I came to conclusion that there is no shortcut to become sucess/rich.You have to work hard to earn money whether it is traditional business or network marketing business.It is responsibility of an individual to take all the information regarding network marketing company before joining as you do for traditional business/companies.

In every field success rate is very small.See the examples like-pre medicals exam, CATS, here success rate is 0.5% to 2% only.These success people are who worked hard & that same thing happened in network marketing sir.You have to work hard &devote time to achieve success in any field.Can anybody tell me any profession or business not effected by negative incidents.

Shrinidhi,I regret to say that you have a real arrogant approach towards other's views. While I acknowledge that in general your posts are quite interesting, I must say you have lot of prejudice. NM/MLM is not necessarily a pyramid scheme!! For the very simple reason that they do infact sell a high quality product, though there are companies who just somehow "fit" a product to create a business out of it.

I will take the particular example of Amway, since you seem to be an expert of NM/MLM companies in general and Amway in particular -

0. NM/MLM business is a salesman business. It is NOT ENGINEERING, DOCTOR, TEACHING OR ANY OTHER SORT OF profession. You have to be a hardcore salesman. I don't think you really need a world class MBA to sell products, though many people prefer it thatways.

1. Amway sells products and you pay for the products. In fact you can survive and make some money only selling products, as being a distributor you get products on wholesale price. There are many people out there who make money like that. Please don't ask how many! It is like asking how many shopkeepers make money selling LUX soap or PONDS cream. I don't know, please go out and find it for yourself.

2. Regarding the comission paid, it comes from the amount they save on direct advertising. Though they still do some very small advertising as a PR activities. These are both in print (Outlook Express, India Today etc) and in TV (SAB TV, MAX etc).

3. The base fundamental is very simple, save on distribution channel and adevertising. Instead these companies rely on personal recommendations, which is the so far the most powerful and effective way to recommend and sell your product.

4. Amway has a monthly magazine which goes by the name of "Amagram", it lists all the people who become Silver producers, Gold producers,..., diamonds, double diamonds etc. They are far more in numbers, please see their address and bother to meet them personally. Anyway you are also a seasoned traveller. Most of India's successful distributors come from a small town of South India - Erode. Please pay a visit and see how a town is gifted to have all its members as "brainwashers" and conn men.

5. Amyway products are costly! Yes they are! In fact they are 10 times more costly than average products! But they give you products in concentrate amounts. Take for example their window cleaner "See Spray" cost around 5 times than a market popular "Collins Spray", but if you read the instructions carefully you will learn that you can create 5-6 bottles out of this concentrate. Regarding their toothpaste, it costs twice the normal toothpase such as "Pepsodent", but you need to apply only a fraction of what you apply in case of Pepsodent. Amway products come concentrate in order to save on production tax. Same way a 100gm flour pack will cost comparatively more than say 20kgs pack of flour. The more you buy the more you save.

6. I have been an Amway distributor for around 3 years or so and I have not earn amything more than few hundred rupees, because it needs real pain and hardwork to do this job. I have no regrets, but I am not biased against NM/MLM or Amway like you.

7. Regarding pumping money into the system thing, it looks way too amatuerish of you to even say something like that. In a system where there are consumers, money will always be pumped in. Remember an Amway distributor itself is a consumer of Amway's products first.

8. I am not sure how millions of people are foolish enough to have pumped money into Amway for last 60 years!! May be those silly people were not intelligent as you are.

9. You have no understanding of business models, to an extent that you don't know what is difference between a NM/MLM company and a pyramid scheme.

10. For your information a MLM is typically a franchise business model, where every distributor is allowed to give any number of franchise he wishes, and these new distributors will have same rights as the referral distributor.

11. Yes it is 100% possible for you downlines to earn n times you earn, may be you need to attend the presentations more carefully before making assertions.

12. MLM is a new way of doing business which rivals the traditional model. Both have their own share of strength and weaknesses.

13. An MLM company does not employees you, you are in itself a miniature version of that company itself, and based on your work you can become millionare or earn nothing. I don't understand why you persist on getting a refund. You have purchased the products with that money, which you pay while joining and you want a refund if you could not earn after not working hard enough.

I must say with regret that you are not opened to others ideas, I could see Jamar Pryor getting bugged up by you. I think you suffer from "Middle class" mentality syndrome. There is no "scheme" (as you put it) in this world to get rich quick by not working hard enough. People like you want to gain quickly without putting anything into it. This never works! Either you put hard work or money, without which businesses are bound to fail. It is not important to know the name of Jamar's company, because you have already made your mind to bring all NM/MLM companies down. In fact I appreciate his integrity as he could have told some false name to mislead you but he chose not to.

As Jamar said I am putting it again, there are good "traditional" and bad ones, this goes same for MLM/NM compaines as well.

Please have some integrity in your approach and behaviour, you stated earlier on that NM/MLM business is illegal and now you say that you are only "analysing" them. It is like a slap on your own face. I am really sorry to be straight forward and direct (and somewhat hars) in my communication, but it is very important to be open minded and receptive.

For your information, I am not involved in Amway business anymore and I have no financial/social interest in this company, in fact I don't plan to be part of it in future. I don't think I have energy and motivation and will to do so, all because of my personal preference. But I don't hate these companies like you.

Just because QN is a bad company (as you say) you cannot start blamming each and every MLM company on this ground. As failure of Satyam Computers does not mean Indian IT companies are bad.

Traditional companies also do fail like MLM companies, even to a limit like recently Satyam founder Ramamliga Raju who is alleged to have taken money out of employee's Provident Fund ;-)

You need to do your homework properly, I don't know how you can analyse even without being part of the thing. You are basing all of your analysis/research on few presentation. You do test Mahindra Xylo and Maruti A-Star by test riding them and give an analysis based on fact, which is a real analysis, why don't you do this with Amway, QN or whatever you are commenting on?

Dude, you need to listen to people and base your decisions on facts rather than your opinions. Every Tom, Dick and Harry in this world has opinions, the way you have. Regarding your comments on selling dreams, here is my answer - Which company does not sell dreams? All advertisments in fact sell dreams so what wrong MLM are doing?

How can Coke and Pepsi show drinking their beverages make India win cricket match? Or that using a particular toothpaste win you a business contract? Or eating particular ghee makes you stronger like Hercules? Why don't you term such superficial ads as illegal and file a petition against them in court of justice? I hope you got the message.

I am sure even after I replied you each and every point you will still strike back, since you are a highly IGNORANT, ARROGANT person, who just wants to push his agenda. Have some courage and accept you mistakes, after all we all are humans and we make mistakes.

MLM or network marketing I think is a really good, fast and legal way to earn a living - both offline and online. Too bad there are scams out there that smudge the good face of the industry. On the other hand, there are also those that are legit, some of which I'm a part of.

Hi Everybody,While searching the stuff regarding NGO's, I saw this wonderful forum, where the discussions were really really hot about MLM.

My views are pretty longer and takes a bit of time to go through, but, if you go through completly, I am sure you will have some information.

Very firstly, let us all thank Mr.Srinidhi for opening a forum where in people having negative of the negative views about MLM can have very good information from good leaders like Mr.Jamar and Ms.Mozilla.They already have enlighten the audience with a rich information of the Industry.

On the very outset, for all those who had got into MLM and not continuing, and arguing that, i have lost my friends, I have to say that "WINNERS NEVER QUIT AND QUITTERS NEVER WIN". There are ways how you handle a human relationship.

I always say to people that "winners have to do different things differently" against Mr.Shiv Khera's Saying "Winners have to do different things differently". As by doing something different at your work place, can get you a few penny or a promotion with a hike of Rs.500 to Rs.1000!!!.

I request people who are there in this forum to just visit this wonderful video available on youtube.http://www.youtube.com/watch?v=HQM8rQzw7kY wherein Robert T Kiyosaki clearly explains the cashflow qudrant.

Another video of Tim Sales (worlds network marketing best trainer) on why people quit NM. http://www.youtube.com/watch?v=-LEjX1GfDEI

Never in the history of MLM, a person failed, as there is a great difference between Failing and quitting.

American Ex-President Bill clinton's video, where in he also promotes NM as one of the noble profession and gives a great statistics of the industry.http://www.youtube.com/watch?v=X_eGbfTPbGY

I am really proud to give you the statistics of this industry, probably very few has this info..

1) Indian NM industry has made a turn over of more than $4 Billion in 2007-08.2) NM industries turn over in America in 07-08 was $110 Billion.3)Out of every 100 crorepatis in America, 30-40% of the crorepatis are from MLM industry.4)MLM industry will have a market share of more than 25% in 2020, as per the experts, as today from pin to elephant there is MLM coverage.

But my dear friends, there are a few things before you choose a MLM and decide to do buisness with a particular company. I request you to have knowledge of this and then start criticizing about the different MLM's. Have you ever analysed the company in respect of 1)stability & credibility of the company2)Management3)Income Plan4)Legality & certifications5)Team Support & training

All the time, you analyse the companies like yahoo or google or amazon.com or whatever, kind of comapnies before joing those for your employment. But how about these MLM's?

Any company having a very good base of the above specified, one can judge that, it could be a very good MLM.

I have lots to share with this forum...Will surely share in bits & bytes...

I am not sure if you have written this article with ignorence or frustration however The first and foremost question I would like to ask you is that, If I prove you wrong will you join my busniess (except couple of points you have mentioned). Below is my answer to your points.....1.Not all but few, this is purely coz of people like you who creates adverse effect. I will give a example If I say I am working in a MLM and will join? you say no, why the answer is not clear to you even. This is just your Mindset.Have you ever joined in any MLM? By seeing the presntation you can't judge right? You have ignored to join only b'coz you have heard from other people. Did you ever asked why did they fail? you will get funny answers...My point here is at least avoid demotivatng others.Thats why most of them wont refer as an MLM.2.That is the funda of MLM, every person who joins this business knows it. Nothing speacial about this point.3.It is only with product selling companies not in services companies. I sell Insurance (ULIP )through network, what I get is commission+ rewards+ business opportunity.The price is same if they buy with me or any agent or even directly from the company.So how will be benifitted?Simple its me and my people.4.Not relevant to my company.I sell service / investment.5. Same price for My company service in open market.6.You are right, My company hasn't thought about it still.7. My company has shelled out 100cr recently to by the land in Bangalore. Also It employess 3000+ on rolls of the company which is the only MLM company in India doing so.

8.Lot of training program from the company itslef.It spends almost 15% on the members.9.In India MLM is at the booming stage not saturation, The raw material for MLM is human beings which is abundant, I believe you agree.10.MLM is not for the person who thinks "once I invest some thing immediately I want to be a millionier",you will get nothing in this world for free.If a bank gives loan to join what will be the big thing in it. When you invest your hard earned money then you will be serious about the business.I will ask a question to you now,I believe you are working some where right? do you put your 100% ? If you had your own business haven't you put more effort? similarly when some gives loan to join your effort will be less.11.Unable to see point number 11.12.What happens if you eat half boiled foods.You vomit right, same type it is not good speak with learing about the process. This is the biggest mistake and reason why 90% of people fail in MLM.13.One should know that if he enters MLM, he should work. Without working you can't expect your investment back. MLM works on a PPP formulae - Plan,prepare,perform and a firm Mindset to achieve the dream.14.It purely depends on what type of company you are opting to join.In my company if you wont work also you will get returns after 3 years more than what you have invested as it is ULIP insurance and it is a investment.15.It definitely counts a lot, you can easily join in HR dept of a company.Also note that a person who worked full time MLM will never ever think about working in any other company rather he will choose other MLM.16.I don't know what you want prove here, however even though God is only one we call in mltiple names.It is just like that.People worship through different names of God.17.It simple, MLM gives more benifitte. I would like to give you example here...If you work for 9 hrs a day, 20 days a month for 12 months.It will be sums up to 2160 productive hrs.Think you will get 100rs per hour, so you have got 21600rs end of the year. Now think you are a CEO of the company and you have 10 people including you and each one puts the same effort and you will earn 10% of the amount what your employees earn so you will earn 43200/- you earned by leveraging others people effort right.You can just think how much companies earn using your skill set. where as in MLM you will be the CEO of your business it depends on the person how much seriously he would like to persue his business my freind.18.There is a chance for everyone to make money not for the people who are in top. The people with right attitude,mindset, specific goal hungry for money can also make money.19.Still we can eliminate poverty, we need people like you who are educated and can explain the advnatages of the MLM.Spread the good things. P.S : These are my thoughts,I don't wanted to hurt you at any point of time.Just wanted to eradicate the misconception you had on MLM.I have started a blog recently, in which I will be updating more about MLM. You can keep in touch. Last but not least I am proud to be part of MLM industry and associated with 1500Cr turnover MLM company who sells only Insurance thro' network and off late we have started opertions in other countries as well.

hi srinidhi,I am Prem a defence service employee. What u have mentioned is an eye opener in tthis modern age. Where reality is minimal and fake things r overshadowing the true things. Also give your views on insurance companies and their status and claims.nice work done, thanks yet again. yrrs Prem Shankar, 9633197612

I think your your blog is very good, the only problem I have with it is that you misspelled, "loser". You used the word "loosers". There is no such word.

I don't mean to be nit-picky, but many of the websites that I read about the negative effects of MLM's has many misspelled words and I think this makes the website and the opinions of the person writing it look non-credible.

I have a son who is trapped in the Amway scheme and cannot see it. I want to find good information supporting the reasons that we feel he needs to get out, but most of what I find is not professional and has many grammar and spelling errors.

QNEt is the world's number one MLM Business model. If some people are performing unethical activity, you cannot blame the whole company to be a fraud. QNET is a perfectly legitimate company with a brilliant at the same time simple business model. One should not just spread confusion about such a good company. If someone is at loss then it is you guys who don't want to be a part of such great business model and not QNet. If you don't want to be a part of QNet, never mind but please don't stop others. I am a part of QNet since last few year, around 3 years, and I have never faced any such problem is past 3years. It is the fraudulent people who make a fool out of people and not QNet.

Questnet is one of the best MLM firms as they have good products and are very supportive to their IRS. If you are de-motivated, do attend the training sessions as it really helps one to transform from within and this automatically leads to improve in performance.

Something right .. Something wrong due the fact that the analyser never lived the network marketing from inside but is only an external observer... In any case there are direct responsability of many not company but the main responsable is the governement that HAS TO ESTABILISH RULES (LOWS) to prevent cheating and deception... I am a Italian networker and in the past I have cheated by an Italian MLM company. The governement made a new law (low 173/2005) and made cleaning in Italian MLM sector...MLM is a serious opportunity that is being studied in many university! Best regards

We all are brain-washed,well at least neutrally,see guys,if this blog said only about the bads,for sure,he/she dig in only a dust in a whole ocean,guys wake up,please don't argue more with MLM,alert with global economic growth(or de-growth),trust me there is no easy path,and i believe all networker face all sort of brunt in order to succeed,that's why many fail to do so,simply it is just that hard,and it's true!you just can't blame a company if you failed,well i'm not touching on Sri Lanka incident,you know what?This era,sales is not only concern on products and service anymore(however if there is no products etc,mainly is a high risk business) ,what is the greatest currency in the world now?is man-relationship(somehow,product is included)!Let"s be frank,everyone want money,not to mention cashflow chart,oh wait,you're saying whether the money is legal or not?Well then why do they(networker) continue to do?If you have more than 10 IR defending their company in this post,well at least this is the proof,for those who never experience MLM before include only researcher,please you will never ever know well than those networker inside,i suggest you ask both succefull networker and failler too.Last for the those who didn't manage,remember it's not your fault not the company,you just have to learn more,MLM is simply not for those seeking easy-money,TQ

Its a good analysis, but its seesm that you dont know anything about real Quest netQuest net legally has an entity in Sri Lanka, they pay taxes..They invest in training people...you talk about high pricing with what substitutes you are comparing the products? there are no substitutes, They have a strategic partnership with Sir Richard Brandsom(Owner of Virgin Group) one of the Best euntroprenuers on the planet... they sponsors a Formula 1 team... you have lot of time to analyse the things which seems logical.. why not analyse the whole direct selling industry which worth $ 200 Billion in the world... if MLMs are not logical how come it became the most growing industry in the world even during the recession,read 2011 World Economic Forum Asia list of most growing Billion Dollar credible companies Quest net is one of them,its not logical Facebook to to be a $ 100 Billion company but its a Billion Dollar Company... my friend logic doesn't bring success.. its the passion which brings success... if you think MLM is easy way to make money... you are wrong.. it requires years of training to be successful in MLM industry.. its experiencial knowledge.. which cannot be earned in books or schools.. people who do it correctly for few years only know this... if you are a good networker you never fail in life, its a Great learning... by the way I do have 4 degrees & a masters ( in Finance, IT & marketing ).. pls remember if everything is logical, why Phd in Finance are still lecturing they should be Billioniers... if I had this time to analyse MLM I use that time to buy some shares in MLM companies & make a profit.. "Warren Buffet" ( the Richest investor in the world) own 3 MLMs & he publicly says those are his Best investments...

If you are a true blogger and want to give credible information to your readers then i would think you should invest your time in fnding more facts. The economic dynamics of the world is constantly changing and therefore finding facts should be a continuous process. And over a period of time, if you notice a change, then you should be open to acknowledge it.

Unfortunately, you wont be able to understand the real NM industry and the way companies work, unless you are in the business. Becuase this industry is like swimming. You wont learn/know anything until and unles you jump into the pool. Just as you cant go to www.swimming.com and learn swimmimng.

Its almost 4 years since your blog and the industry has evolved over these years along with ecommerce. Therefore, I suggest, before you make further claims about a $150B industry, open your mind, spend some time (a few months), select a good ompany (let it be QNET itself!) do the business and see for yourself (let me warn you, do not expect any quick success; its real hard work). And then, come back and voice your opinion. I am sure, out of all those points which you have mentioned, at least a few would change. Post a new blog again with your new findings. Then people would respect you. And appreciate you. That's how you prove your credibility.

1) MLM business idea is not ethical at all in my opinion. My reasoning is that as if i am consumer of the product and i really like the product i will guide others by saying what benefits i got from it. On the MLMs you lose the humanity touch and you just want others including your friends and family members to join and use their product mainly because you will gain something out of their purchases.

2) One more unethical work of MLM is that MLMs product is way above the market value. My argument is based on that they distribute the contribution to all the above chain members and keep some profit for the company itself as well, so what is the actual product cost? And what is the premium charged to the end-user? As per my calculation the margin (super normal profit) charged on the product will be somewhere around 80% of the actual production cost.

In the normal marketplace these super normal profit is only enjoyed by either monopolistic organization or cheaters. The monopolistic organization tends to lose their extensive margins by new entrants or by government restrictions. However, in MLMs case this is not going to happen due to the fact they are cheating mass people at an affordable level. The interesting question is then why Government and Media are not taking any action? I don’t have the answer to this question and would like to hear from someone who has, though I know that it has been banned from many countries likes of Sri Lanka, Sudan, Saudi Arabia, Iran, Syria, Indonesia etc.

3) Although most of the MLMs tells that there IRS are their business partners and they are providing business opportunity to the masses who otherwise cannot afford to do business. First of all it is not a business it is that i am signing as a sales agent to this organization for free (without having any firm commitment and legal rights on the organization). Secondly, if i open my own business even like buying a franchise, i get full control over all its affairs including but not limited to its legality, suppliers, customers, product range, marketing, selling, pricing, hiring, after sales etc., in the MLM case on which thing i have control? Thirdly, i will get a fixed share of what my chain generates what about the overall profitability of the organization, what control i have over it? So, for God sake kindly stop calling this as a business opportunity, be true to yourself and others and say that we need sales agents irrespective of his background and abilities just the only recruiting criteria is that the person should have initial buying capacity.

4) Lastly, I am just putting a theoretical scenario, suppose every single person in the world joined MLM then what? As per the facts provided in one of the earlier comments 97 to 98% of the world population will be on the losing side. Think about it.

5) However, I agree that MLMs are reality and there are success stories in the marketplaces, but on the other hand MLMs are not everyone’s game. Not every individual can succeed, it needs, time, devotion, skills of convincing (brainwashing), somewhat skills lying/hiding, and materialistic mind.

In conclusion my view is that there are pros and cons for every single thing in the world which is the case with MLMs as well. Though our selection is based on evaluation of whether the thing has more pros then cons or vice versa. Moreover, success of certain thing does not make it a good thing the extreme example of which that mafia business is very successful but it is bad, isn’t it? So evaluate its roots/rules/policies/basis/culture of doing business along with pros and cons.

Is there some way we can teach these companies/agents a lesson who cheat ppl by luring them by exploiting their painpoints and dupe them of their hard earned money.. Is there a legal route..I'll persue it till death..

My cousin's friend came up with a Qnet membership proposal and he was undecided whether to join. I didn't know how to convince him that it may not be a good idea and there was possibility of loosing money. When I searched the net for more info about the company, I stumbled across this blog.

Thanks Shrinidhi! you made my job infinetly easier. One look at your article and he flatly informed his friend that he is not intrested.

May I ask what you do Nidhi apart from "analysing" business and industries. Seeing your "experience" I am sure you're a top shot investor making millions out of your "intelligence" and mentoring hundreds of people with your business advice by growing their money.

Appreciate your efforts and interests to comment. Comments may be moderated due to increased spam. Will ideally respond to comments within few days.Use Anonymous option if you don't wish to leave your name/ID behind- Shrinidhi